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12-105(L)
NML Capital, Ltd. v. Republic of Argentina

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UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT
_____________________
August Term, 2012
(Argued: February 27, 2013

Decided: August 23, 2013)

Docket Nos. 12-105(L), 12-109 (CON), 12-111 (CON), 12-157 (CON), 12-158 (CON), 12-163
(CON), 12-164 (CON), 12-170 (CON), 12-176 (CON), 12-185 (CON), 12-189 (CON), 12-214
(CON), 12-909 (CON), 12-914 (CON), 12-916 (CON), 12-919 (CON), 12-920 (CON), 12-923
(CON), 12-924 (CON), 12-926 (CON), 12-939 (CON), 12-943 (CON), 12-951 (CON), 12-968
(CON), 12-971 (CON), 12-4694 (CON), 12-4829 (CON), 12-4865 (CON)*
_____________________
NML CAPITAL, LTD., AURELIUS CAPITAL MASTER, LTD., ACP MASTER, LTD., BLUE ANGEL
CAPITAL I LLC, AURELIUS OPPORTUNITIES FUND II, LLC, PABLO ALBERTO VARELA, LILA INES
BURGUENO, MIRTA SUSANA DIEGUEZ, MARIA EVANGELINA CARBALLO, LEANDRO DANIEL
POMILIO, SUSANA AQUERRETA, MARIA ELENA CORRAL, TERESA MUNOZ DE CORRAL, NORMA
ELSA LAVORATO, CARMEN IRMA LAVORATO, CESAR RUBEN VAZQUEZ, NORMA HAYDEE GINES,
MARTA AZUCENA VAZQUEZ, OLIFANT FUND, LTD.,
Plaintiffs-Appellees,
v.
THE REPUBLIC OF ARGENTINA,
Defendant-Appellant,
THE BANK OF NEW YORK MELLON, as Indenture Trustee, EXCHANGE BONDHOLDER GROUP,
FINTECH ADVISORY INC.,
Non-Party Appellants,

Appeals numbered 12-105, 12-109, 12-111, 12-157, 12-158, 12-163, 12-164, 12-170,
12-176, 12-185, 12-189, and 12-214 were dismissed as of October 26, 2012. Appeals numbered
12-909, 12-914, 12-916, 12-919, 12-920, 12-923, 12-924, 12-926, 12-939, 12-943, 12-951,
12-968, 12-971, 12-4829 are decided by this opinion. Appeals numbered 12-4694 and 12-4865
are dismissed by this opinion.
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EURO BONDHOLDERS, ICE CANYON LLC,

Intervenors.
Before: POOLER, B.D. PARKER, and RAGGI, Circuit Judges.
___________________
Defendant-Appellant the Republic of Argentina, Non-Party Appellants, and Intervenors
appeal from amended orders issued by the United States District Court for the Southern District
of New York (Griesa, J.). The amendments explain certain aspects of those orders which were
designed to remedy Argentinas breach of a promise to pay bondholders after a 2001 default on
its sovereign debt. We hold that the district court did not abuse its discretion in issuing the
orders.
AFFIRMED.
___________________
THEODORE B. OLSON (Matthew D. McGill, Jason J.
Mendro, on the brief), Gibson, Dunn & Crutcher
LLP, Washington, D.C.; Robert A. Cohen, Eric C.
Kirsch, Dechert LLP, New York, N.Y., for
Plaintiff-Appellee NML Capital, Ltd.
Leonard F. Lesser, Simon Lesser, P.C., New York,
N.Y., for Plaintiff-Appellee Olifant Fund, Ltd.
Michael C. Spencer, Milberg LLP, New York, N.Y., for
Plaintiffs-Appellees Pablo Alberto Varela, et al.
Edward A. Friedman, Daniel B. Rapport, Friedman
Kaplan Seiler & Adelman LLP, New York, N.Y.;
Roy T. Englert, Jr., Mark T. Stancil, Robbins,
Russell, Englert, Orseck, Untereiner & Sauber LLP,
Washington, D.C., for Plaintiffs-Appellees Aurelius
Capital Master, Ltd., ACP Master, Ltd., Blue Angel
Capital I LLC, and Aurelius Opportunities Master
Fund II, LLC.
JONATHAN I. BLACKMAN (Carmine D. Boccuzzi,
Ezequiel Sanchez-Herrera, Sara A. Sanchez,
Michael M. Brennan, on the brief), Cleary Gottlieb
Steen & Hamilton LLP, New York, N.Y., for
Defendant-Appellant the Republic of Argentina.

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JAMES C. MARTIN (Colin E. Wrabley, on the brief),

Reed Smith LLP, Pittsburg, Penn.; Eric A Schaffer,
Reed Smith LLP, New York, N.Y., for Non-Party
Appellant The Bank of New York Mellon, as
Indenture Trustee.
DAVID BOIES (David A. Barrett, Nicholas A. Gravante,
Jr., Steven I. Froot, on the brief), Boies, Schiller &
Flexner LLP, New York, N.Y.; Sean F. OShea,
Michael E. Petrella, Daniel M. Hibshoosh, OShea
Partners LLP, New York, N.Y., for Non-Party
Appellants the Exchange Bondholder Group.
William F. Dahill, Wollmuth Maher & Deutsch LLP,
New York, N.Y., for Non-Party Appellant Fintech
Advisory Inc.
Christopher J. Clark, Craig A. Batchelor, Michael E.
Bern, Latham & Watkins, LLP, New York, N.Y.,
for Intervenors Euro Bondholders.
Bruce Bennett, James O. Johnston, Beong-Soo Kim,
Jones Day, Los Angeles, Cal.; Meir Feder, Jones
Day, New York, N.Y., for Intervenor ICE Canyon
LLC.
David W. Rivkin, Suzanne M. Grosso, Debevoise &
Plimpton LLP, New York, N.Y., for Amicus Curiae
EM Ltd., in support of Plaintiffs-Appellees.
Ronald Mann, Esq., New York, N.Y., Amicus Curiae
pro se, in support of Plaintiffs-Appellees.
Jack L. Goldsmith III, Cambridge, Mass.; Judd B.
Grossman, Grossman LLP, New York, N.Y., for
Amici Curiae Montreux Partners, L.P. and Wilton
Capital, in support of Plaintiffs-Appellees.
Richard A. Samp, Cory L. Andrews, Washington Legal
Foundation, Washington, D.C., for Amicus Curiae
the Washington Legal Foundation, in support of
Plaintiffs-Appellees.

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Kevin S. Reed, Quinn Emanuel Urquhart & Sullivan,

LLP, New York, N.Y., for Amicus Curiae Prof.
Kenneth W. Dam, in support of Plaintiffs-Appellees.
Anthony J. Costantini, Rudolph J. Di Massa, Jr., Suzan
Jo, Mary C. Pennisi, Duane Morris LLP, New York,
N.Y., for Duane Morris Individual PlaintiffsAppellees.
Paul Saltzman, Joseph R. Alexander, The Clearing
House Association L.L.C., New York, N.Y.; H.
Rodgin Cohen, Michael M. Wiseman, Sergio J.
Galvis, Joseph E. Neuhaus, Michael J. Ushkow,
Jared P. Roscoe, Sullivan & Cromwell LLP, New
York, N.Y., for Amicus Curiae The Clearing House
Association L.L.C., in support of DefendantAppellant.
Eugenio A. Bruno, Estudio Garrido, Buenos Aires,
Argentina; M. Darren Traub, Akerman Senterfitt,
LLP, New York, N.Y. for Amicus Curiae Alfonso
Prat-Gay, in support of Defendant-Appellant.
Edward Scarvalone, Doar Rieck Kaley & Mack, New
York, N.Y., for Amicus Curiae Prof. Anne Krueger,
in support of Defendant-Appellant.
Paul T. Shoemaker, Greenfield Stein & Senior LLP,
New York, N.Y., for Amicus Curiae Euroclear
Bank SA/NV, in support of Defendant-Appellant.
Marco E. Schnabl, Timothy G. Nelson, Skadden, Arps,
Slate, Meagher & Flom LLP, New York, N.Y., for
Amicus Curiae Puente Hnos. Sociedad de Bolsa
S.A., in support of Defendant-Appellant.
Matthew D. Ingber, Chrisopher J. Houpt, Mayer Brown
LLP, New York, N.Y.; Charles A. Rothfeld, Paul
W. Hughes, Mayer Brown LLP, Washington, D.C.,
for Amicus Curiae the American Bankers
Association, in support of Non-Party Appellant The
Bank of New York Mellon.

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______________________________________________________________________________
BARRINGTON D. PARKER, Circuit Judge:

This is a contract case in which the Republic of Argentina refuses to pay certain holders

of sovereign bonds issued under a 1994 Fiscal Agency Agreement (hereinafter, the FAA and

the FAA Bonds). In order to enhance the marketability of the bonds, Argentina made a series

of promises to the purchasers. Argentina promised periodic interest payments. Argentina

promised that the bonds would be governed by New York law. Argentina promised that, in the

event of default, unpaid interest and principal would become due in full. Argentina promised

that any disputes concerning the bonds could be adjudicated in the courts of New York.

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Argentina promised that each bond would be transferrable and payable to the transferee,

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regardless of whether it was a university endowment, a so-called vulture fund, or a widow or

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an orphan. Finally, Argentina promised to treat the FAA Bonds at least equally with its other

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external indebtedness. As we have held, by defaulting on the Bonds, enacting legislation

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specifically forbidding future payment on them, and continuing to pay interest on subsequently

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issued debt, Argentina breached its promise of equal treatment. See NML Capital, Ltd. v.

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Republic of Argentina, 699 F.3d 246 (2d Cir. 2012) (NML I).

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Specifically, in October 2012, we affirmed injunctions issued by the district court

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intended to remedy Argentinas breach of the equal treatment obligation in the FAA. See id.

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Our opinion chronicled pertinent aspects of Argentinas fiscal history and the factual background

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of this case, see id. at 251-57, familiarity with which is assumed.1 Those injunctions, fashioned

For a more comprehensive narrative of Argentinas long history of defaulting on its

debts, see Judge Jos Cabraness opinion in EM Ltd. v. Republic of Argentina, 473 F.3d 463, 466
n.2 (2d Cir. 2007).
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by the Hon. Thomas P. Griesa, directed that whenever Argentina pays on the bonds or other

obligations that it issued in 2005 or 2010 exchange offers (the Exchange Bonds), the Republic

must also make a ratable payment to plaintiffs who hold defaulted FAA Bonds. We remanded,

however, for the district court to clarify the injunctions payment formula and effects on third

parties and intermediary banks, and retained jurisdiction pursuant to United States v. Jacobson,

15 F.3d 19 (2d Cir. 1994).

On November 21, 2012, the district court issued amended injunctions with the

clarifications we requested,2 as well as an opinion explaining them, which are challenged on this

appeal by Argentina as well as by non-party appellants and intervenors. See NML Capital, Ltd.

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v. Republic of Argentina, No. 08 Civ. 6978 (TPG), 2012 WL 5895786 (S.D.N.Y. Nov. 21, 2012)

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(NML II). Recognizing the unusual nature of this litigation and the importance to Argentina of

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the issues presented, following oral argument, we invited Argentina to propose to the appellees

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an alternative payment formula and schedule for the outstanding bonds to which it was prepared

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to commit. Instead, the proposal submitted by Argentina ignored the outstanding bonds and

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proposed an entirely new set of substitute bonds.3 In sum, no productive proposals have been

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forthcoming. To the contrary, notwithstanding its commitment to resolving disputes involving

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the FAA in New York courts under New York law, at the February 27, 2013 oral argument,

See NML Capital, Ltd. v. Republic of Argentina, No. 08 Civ. 6978 (TPG), 2012 WL
5895784 (S.D.N.Y. Nov. 21, 2012); Aurelius Capital Master, Ltd. & ACP Master, Ltd. v.
Republic of Argentina, No. 09 Civ. 8757 (TPG), Dkt. No. 312 (S.D.N.Y. Nov. 26, 2012); Olifant
Fund, Ltd. v. Republic of Argentina, No. 10 Civ. 9587, Dkt. No. 40 (S.D.N.Y. Nov. 26, 2012);
Varela v. Republic of Argentina, No. 10 Civ. 5338, Dkt. No. 64 (S.D.N.Y. Nov. 26, 2012). We
refer to these collectively as the amended injunctions.
3

See Dkt. No. 935 (Argentinas Proposal of March 29, 2013); see also Dkt. No. 950
(Appellees April 22, 2013 Response to Argentinas Proposal).
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counsel for Argentina told the panel that it would not voluntarily obey the district courts

injunctions, even if those injunctions were upheld by this Court. Moreover, Argentinas officials

have publicly and repeatedly announced their intention to defy any rulings of this Court and the

district court with which they disagree.4 It is within this context that we review the amended

injunctions for abuse of discretion and, finding none, we affirm.5 However, in view of the nature

of the issues presented, we will stay enforcement of the injunctions pending resolution of a

timely petition to the Supreme Court for a writ of certiorari.6

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In its opinion, the district court first explained that its ratable payment requirement
meant that whenever Argentina pays a percentage of what is due on the Exchange Bonds, it must

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pay plaintiffs the same percentage of what is then due on the FAA Bonds. Id. at *2. Under the

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express terms of the FAA, as negotiated and agreed to by Argentina, the amount currently due on

Argentine President Cristina Fernndez de Kirchner is quoted as announcing that

Argentina will pay on the Exchange Bonds but not one dollar to the vulture funds, referring
to FAA Bondholders such as plaintiff NML Capital, Ltd. Argentina to Blast Vulture Funds at
the G20 Ministerial Meeting in Mexico, MercoPress, Nov. 4, 2012, Supp. App. 391. The
Republics Economy Minister Hernan Lorenzino is quoted as echoing that Argentina isnt
going to change its position of not paying vulture funds . . . . We will continue to follow that
policy despite any ruling that could come out of any jurisdiction, in this case New York. Ken
Parks & Charles Roth, Argentina Grapples with Credit-Rating Challenges, Wall St. J., Oct. 31,
2012, Supp. App. 395. In a speech apparently posted to a presidential website, President
Kirchner criticized the justice system overseen by this Court, stating that it evidently is
unaware of its own legislation. Supp. App. 553.
5

See City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 142 (2d Cir. 2011). A
district court abuses its discretion when it bases a ruling on an erroneous view of the law or on a
clearly erroneous assessment of the evidence, or render[s] a decision that cannot be located
within the range of permissible decisions. Sims v. Blot, 534 F.3d 117, 132 (2d Cir. 2008)
(internal quotation marks omitted).
6

Apparently, Argentina filed a petition for certiorari in this matter on June 24, 2013,
notwithstanding that, as of that date, no final order had yet issued in this case. See Supreme
Court Dkt. 12-1494.
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the FAA Bonds, as a consequence of its default, is the outstanding principal and accrued interest.

See id.; NML I at 254 n.7; see also Appellant Argentina 2012 Br. at 26 ([T]he contractually

agreed upon remedy [for default] is acceleration of principal, an action already taken by these

plaintiffs.). Thus, as the district court explained, if Argentina pays Exchange Bondholders

100% of what has come due on their bonds at a given time, it must also pay plaintiffs 100% of

the roughly $1.33 billion of principal and accrued interest that they are currently due. See NML

II at *3.

Second, the district court explained how its injunctions would prevent third parties from

assisting Argentina in evading the injunctions. Though the amended (and original) injunctions

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directly bind only Argentina, the district court correctly explained that, through the automatic

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operation of Federal Rule of Civil Procedure 65(d), they also bind Argentinas agents and

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other persons who are in active concert or participation with Argentina. See id. at *4; Fed. R.

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Civ. P. 65(d)(2). Those bound under the operation of Rule 65(d) would include certain entities

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involved in the system through which Argentina pays Exchange Bondholders. As the district

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court stated:

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Argentina transfers funds to the Bank of New York Mellon (BNY), which is the
indenture trustee in a Trust Indenture of 2005. Presumably there is a similar
indenture for the 2010 exchange offer. BNY then forwards the funds to the
registered owner of the Exchange Bonds. There are two registered owners for the
2005 and 2010 Exchange Bonds. One is Cede & Co. and the other is the Bank of
New York Depositary (BNY Depositary). Cede and BNY Depositary transfer the
funds to a clearing system such as the Depository Trust Company (DTC). The
funds are then deposited into financial institutions, apparently banks, which then
transfer the funds to their customers who are the beneficial interest holders of the
bonds.
NML II at *5. Of these, the amended injunctions cover Argentina, the indenture trustee(s), the

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registered owners, and the clearing systems. See id. The amended injunctions explicitly exempt
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intermediary banks, which enjoy protection under Article 4A of New Yorks Uniform

Commercial Code (U.C.C.), and financial institutions receiving funds from the DTC. See id.

In accordance with our October 2012 opinion, the litigation then returned to our Court.

Argentina has challenged certain aspects of the amended injunctions, and appeals have also

followed from other entities: a group of Exchange Bondholders, styling themselves as the

Exchange Bondholder Group (EBG); the Bank of New York Mellon (BNY), indenture

trustee to Exchange Bondholders; and Fintech Advisory Inc., a holder of Exchange Bonds. We

further received briefing (but no notices of appeal) from two intervenors: a group of bondholders

calling themselves the Euro Bondholders, and ICE Canyon LLC, a holder of GDP-linked

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securities issued by Argentina.

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APPELLATE STANDING

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Neither BNY, EBG, Fintech, Euro Bondholders, nor ICE Canyon intervened below, but

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each seeks to participate here as a non-party. As a general rule, only parties may appeal, but we

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have recognized non-party appellate standing in two situations: where the non-party is bound by

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the judgment and where the non-party has an interest plausibly affected by the judgment. See

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Official Comm. of Unsecured Creditors of WorldCom, Inc. v. S.E.C., 467 F.3d 73, 77-78 (2d Cir.

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2006).

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The amended injunctions provide that BNY, as a participant in the payment process of

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the Exchange Bonds, shall be bound by the terms of this ORDER as provided by [Federal Rule

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of Civil Procedure] 65(d)(2). 2012 WL 5895784, at *2. Accordingly, BNY has standing to

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appeal. See NML Capital, Ltd. v. Banco Central de la Repblica Argentina, 652 F.3d 172, 175

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n.1 (2d Cir. 2011) (holding that non-party Banco Central de la Repblica Argentina had standing

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to challenge attachment and execution order). In contrast, EBG, Fintech, Euro Bondholders, and

ICE Canyon are not bound by the amended injunctions. They are creditors, and, as such, their

interests are not plausibly affected by the injunctions because a creditors interest in getting paid

is not cognizably affected by an order for a debtor to pay a different creditor. Cf. Dish Network

Corp. v. DBSD N. Am., Inc., 634 F.3d 79, 90 (2d Cir. 2010); Evanston Ins. Co. v. Fred A. Tucker

& Co., Inc., 872 F.2d 278, 280 (9th Cir. 1989). If Argentina defaults on its obligations to them,

they retain their rights to sue. And, as discussed below, their interests are not cognizably

affected in any other way. Consequently, EBG, Fintech, Euro Bondholders, and ICE Canyon

have no appellate standing, and the appeals from EBG and Fintech are hereby dismissed. (Euro

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Bondholders and ICE Canyon did not file appeals of their own.)
At the same time, their arguments are not lost because they requested that, in the event

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they were not deemed appellants, the court consider their arguments as coming from amici

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curiae. Because Argentina contends in its own appeal that the amended injunctions should be

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vacated because, among other reasons, they are inequitable to Exchange Bondholders, we will

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consider the arguments of EBG, Fintech, Euro Bondholders, and ICE Canyon as arguments from

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amici curiae in support of Argentina. See Fed. R. App. P. 29(a).7

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Judge Pooler disagrees with the majority decision to dismiss the appeals of EBG,
Fintech, Euro Bondholders, and ICE Canyon. However, as the arguments of the dismissed
appellants are treated as made by amici, and as the status of the non-appellants matters little to
the outcome here, Judge Pooler has agreed to note her disagreement for the record in this
footnote, rather than dissent.
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DISCUSSION

Argentina advances a litany of reasons as to why the amended injunctions unjustly injure

itself, the Exchange Bondholders, participants in the Exchange Bond payment system, and the

public. None of the alleged injuries leads us to find an abuse of the district courts discretion.

I.

Alleged Injuries to Argentina

Argentina argues that the amended injunctions unjustly injure it in two ways. First,

Argentina argues that the amended injunctions violate the Foreign Sovereign Immunities Act

(FSIA) by forcing Argentina to use resources that the statute protects. As discussed in our

October opinion, the original injunctionsand now the amended injunctionsdo not violate the

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FSIA because [t]hey do not attach, arrest, or execute upon any property as proscribed by the

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statute.8 NML I at 262-63. Rather, the injunctions allow Argentina to pay its FAA debts with

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whatever resources it likes. Absent further guidance from the Supreme Court, we remain

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convinced that the amended injunctions are consistent with the FSIA.

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Second, Argentina argues that the injunctions ratable payment remedy is inequitable
because it calls for plaintiffs to receive their full principal and all accrued interest when

As we noted,
[a]n attachment is the seizing of a persons property to secure a judgment or to
be sold in satisfaction of a judgment. Blacks Law Dictionary 123 (9th ed.2009);
see also 6 Am. Jur. 2d Attachment and Garnishment 1. An arrest is [a] seizure or
forcible restraint. Blacks Law Dictionary 124 (9th ed. 2009). Execution is an
act of dominion over specific property by an authorized officer of the court . . . which
results in the creation of a legal right to subject the debtors interest in the property
to the satisfaction of the debt of his or her judgment creditor. 30 Am. Jur. 2d
Executions 177; see also Blacks Law Dictionary (9th ed. 2009) (Judicial
enforcement of a money judgment, usu. by seizing and selling the judgment debtors
property.).
NML I at 262 n.13.
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Exchange Bondholders receive even a single installment of interest on their bonds. However,

the undisputed reason that plaintiffs are entitled immediately to 100% of the principal and

interest on their debt is that the FAA guarantees acceleration of principal and interest in the

event of default. See NML I at 254 n.7; NML II at *4. As the district court concluded, the

amount currently owed to plaintiffs by Argentina as a result of its persistent defaults is the

accelerated principal plus interest. We believe that it is equitable for one creditor to receive what

it bargained for, and is therefore entitled to, even if other creditors, when receiving what they

bargained for, do not receive the same thing. The reason is obvious: the first creditor is

differently situated from other creditors in terms of what is currently due to it under its contract.

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See Fin. One Pub. Co. v. Lehman Bros. Special Fin., Inc., 414 F.3d 325, 344 (2d Cir. 2005).

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Because the district courts decision does no more than hold Argentina to its contractual

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obligation of equal treatment, we see no abuse of discretion.

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Argentina adds that the amended injunctions are invalid because a district court may not

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issue an injunctive remedy [that] was historically unavailable from a court of equity. Grupo

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Mexicano de Desarrollo S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308, 333 (1999). However,

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English chancery courts traditionally had power to issue injunctions and order specific

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performance when no effective remedy was available at law. See 11A Charles Alan Wright &

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Arthur R. Miller, Federal Practice and Procedure 2944 (2d ed. 1994). As we explained in our

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October 2012 opinion, the plaintiffs have no adequate remedy at law because the Republic has

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made clear its intention to defy any money judgment issued by this Court. See NML I at 261-62.

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Moreover, Argentina has gone considerably farther by passing legislation, the Lock Law,

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specifically barring payments to FAA bondholders. And it is unremarkable that a court

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empowered to afford equitable relief may also direct the timing of that relief. Here, that timing

requires that it occur before or when Argentina next pays the Exchange Bondholders.

II.

Alleged Injuries to Exchange Bondholders

Invoking the proposition that equitable relief is inappropriate where it would cause

unreasonable hardship or loss to third persons, see Nemer Jeep-Eagle, Inc. v. Jeep-Eagle Sales

Corp., 992 F.2d 430, 436 (2d Cir. 1993), Argentina, EBG, and Fintech argue that the amended

injunctions are inequitable to Exchange Bondholders.9 But this case presents no conflict with

that proposition. EBG argues, notwithstanding our affirmance of the district courts finding that

Argentina has the financial wherewithal to pay all of its obligations, see NML I at 256, 263, that

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the amended injunctions will harm Exchange Bondholders because Argentina has declared

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publicly that it has no intention of ever paying holdout bondholders like NML and, as a result,

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neither plaintiffs nor Exchange Bondholders will be paid if the amended injunctions stand.

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Appellant EBG Br. 2.

Intervenor ICE Canyon urges that the amended injunctions should not apply to eurodenominated GDP-linked securities that Argentina issued in its 2005 and 2010 exchanges. The
gist of ICE Canyons argument is that the amended injunctions require payment to plaintiffs
whenever Argentina pays on the Exchange Bonds, not when it pays on GDP-linked securities
which yield revenue only if the Republics GDP grows. By their terms, however, the amended
(and original) injunctions require payment to plaintiffs whenever Argentina pays on Exchange
Bonds, defined as including both bonds and other obligations issued in the exchange offers.
2012 WL 5895784, at *2 (emphasis added). The inclusion of other obligations like GDP-linked
securities is unsurprising, given that the FAA required that the FAA Bonds be treated at least
equally with all obligations (other than the [FAA Bonds]) for borrowed money or evidenced by
securities, debentures, notes or other similar instruments denominated or payable, or which at the
option of the holder thereof may be payable, in a currency other than the lawful currency of the
Republic. . . . J.A. 171. The euro-denominated GDP-linked securities fit this description
because they are obligations . . . evidenced by securities . . . denominated . . . in a currency
other than the lawful currency of the Republic. Accordingly, we see no need to clarify the
amended injunctions, and we consider the term Exchange Bonds to include the
euro-denominated GDP-linked securities.
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This type of harmharm threatened to third parties by a party subject to an injunction

who avows not to obey itdoes not make an otherwise lawful injunction inequitable. We are

unwilling to permit Argentinas threats to punish third parties to dictate the availability or terms

of relief under Rule 65. See Reynolds v. Intl Amateur Athletic Fedn, 505 U.S. 1301, 1302

(1992) (Stevens, J., in chambers). Argentinas contention that the amended injunctions are

unfair to Exchange Bondholders is all the less persuasive because, before accepting the exchange

offers, they were expressly warned by Argentina in the accompanying prospectus that there

could be no assurance that litigation over the FAA Bonds would not interfere with payments

under the Exchange Bonds. J.A. 466. Under these circumstances, we conclude that the amended

10

injunctions have no inequitable effect on Exchange Bondholders and find no abuse of

11

discretion.10

12
13

10

The remaining arguments pertaining to Exchange Bondholder interests are similarly

without merit. Exchange Bondholders have suffered no denial of procedural due process
because there is no right to process for non-parties in their position. See Natl Assn of Chain
Drug Stores v. New Eng. Carpenters Health Benefits Fund, 582 F.3d 30, 42 (1st Cir. 2009)
(Impact and legal rights are not the same thing. A decision in a contract dispute or antitrust
case can have drastic effects on suppliers, stockholders, employees and customers of the
company that loses the case; no one thinks the Constitution requires all of them to be
parties.). EBGs substantive due process and Takings Clause arguments fail because the
amended injunctions do not deprive Exchange Bondholders of any property. And lastly, nonpartieseven those whose enjoyment of contractual rights may be affected by a judicial
decisionare not necessary parties for Rule 19 joinder if they can protect their rights in
subsequent litigation. See MasterCard Intl Inc. v. Visa Intl Serv. Assn, Inc., 471 F.3d 377, 386
(2d Cir. 2006). Here, Exchange Bondholders will be affected if, after we affirm the amended
injunctions, Argentina decides to default on the Exchange Bonds, but Exchange Bondholders
would then be able to sue over that default. Accordingly, we find no abuse of discretion in the
amended injunctions with respect to the Exchange Bondholders rights.
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III.

Alleged Injuries to Participants in the Exchange Bond Payment System

Argentina, BNY, Euro Bondholders, and ICE Canyon raise additional issues concerning

the amended injunctions and their effects on the international financial system through which

Argentina pays Exchange Bondholders. The arguments include that (1) the district court lacks

personal jurisdiction over payment system participants and therefore cannot bind them with the

amended injunctions, (2) the amended injunctions cannot apply extraterritorially, (3) payment

system participants are improperly bound because they were denied due process, and (4) the

amended injunctions application to financial system participants would violate the U.C.C.s

protections for intermediary banks. None of these arguments, numerous as they are, has merit.11

10

First, BNY and Euro Bondholders argue that the district court erred by purporting to

11

enjoin payment system participants over which it lacks personal jurisdiction. But the district

12

court has issued injunctions against no one except Argentina. Every injunction issued by a

13

district court automatically forbids otherswho are not directly enjoined but who act in active

14

concert or participation with an enjoined partyfrom assisting in a violation of the injunction.

15

See Fed. R. Civ. P. 65(d). In any event, the Supreme Court has expressed its expectation that,

16

when questions arise as to who is bound by an injunction though operation of Rule 65, district

17

courts will not withhold a clarification in the light of a concrete situation. Regal Knitwear Co.

11

We also note that some payment system participants, ostensibly concerned about being
sued for obeying the injunctions, apparently enjoy the protection of exculpatory clauses in their
contracts. See e.g., Trust Indenture of June 2, 2005, 5.2(xvi), Supp. App. 662 ([BNY] will not
be liable to any person if prevented or delayed in performing any of its obligations . . . by reason
of any present or future law applicable to it, by any governmental or regulatory authority or by
any circumstance beyond its control . . . .).
15

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v. N.L.R.B., 324 U.S. 9, 15 (1945). The doors of the district court obviously remain open for

such applications.

The amended injunctions simply provide notice to payment system participants that they

could become liable through Rule 65 if they assist Argentina in violating the district courts

orders. Since the amended injunctions do not directly enjoin payment system participants, it is

irrelevant whether the district court has personal jurisdiction over them. And of course, [t]here

will be no adjudication of liability against a [non-party] without affording it a full opportunity at

a hearing, after adequate notice, to present evidence. Golden State Bottling Co., Inc. v.

N.L.R.B., 414 U.S. 168, 180 (1973). In such a hearing, before any finding of liability or sanction

10

against a non-party, questions of personal jurisdiction may be properly raised. But, at this point,

11

they are premature. Similarly, payment system participants have not been deprived of due

12

process because, if and when they are summoned to answer for assisting in a violation of the

13

district courts injunctions, they will be entitled to notice and the right to be heard. See id. at

14

181.

15

Euro Bondholders and ICE Canyon next argue that the amended injunctions are improper

16

or at a minimum violate comity where they extraterritorially enjoin payment systems that deliver

17

funds to Exchange Bondholders. But a federal court sitting as a court of equity having personal

18

jurisdiction over a party [here, Argentina] has power to enjoin him from committing acts

19

elsewhere. Bano v. Union Carbide, 361 F.3d 696, 716 (2d Cir. 2004) (internal quotation marks

20

omitted). And federal courts can enjoin conduct that has or is intended to have a substantial

21

effect within the United States. United States v. Davis, 767 F.2d 1025, 1036 (2d Cir. 1985).

16

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The district court put forward sufficient reasons for binding Argentinas conduct,

regardless of whether that conduct occurs here or abroad. See NML II at *4 (noting that if

Argentina is able to pay Exchange Bondholders while avoiding its obligations to plaintiffs, the

Injunctions will be entirely for naught); see also Oral Arg. Tr. Nov. 9, 2012, 16:16-18, Supp.

App. 461 ([T]he Republic has done everything possible to prevent those judgments that have

been entered [against it] from being enforced.). And the district court has articulated good

reasons that the amended injunctions must reach the process by which Argentina pays Exchange

Bondholders. See NML II at *4 (noting that, to prevent Argentina from avoiding its obligations

to plaintiffs, it is necessary that the process for making payments on the Exchange Bonds be

10

covered); id. at *5 (explaining that if Argentina attempts to make payments . . . contrary to

11

law, then third parties should properly be held responsible for making sure that their actions

12

are not steps to carry out a law violation). The amended injunctions do not directly enjoin any

13

foreign entities other than Argentina. By naming certain foreign payment system participants

14

(such as Clearstream Banking S.A., Euroclear Bank S.A./N.V., and Bank of New York

15

(Luxembourg) S.A), the district court was, again, simply recognizing the automatic operation of

16

Rule 65.

17

If ICE Canyon and the Euro Bondholders are correct in stating that the payment process

18

for their securities takes place entirely outside the United States, then the district court misstated

19

that, with the possible exception of Argentinas initial transfer of funds to BNY, the Exchange

20

Bond payment process, without question takes place in the United States. NML II at *5 n.2.

21

But this possible misstatement is of no moment because, again, the amended injunctions enjoin

22

no one but Argentina, a party that has voluntarily submitted to the jurisdiction of the district

17

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court. If others in active concert or participation with Argentina are outside the jurisdiction or

reach of the district court, they may assert as much if and when they are summoned to that court

for having assisted Argentina in violating United States law.

Argentina and Fintech further argue that the amended injunctions violate Article 4A of

the U.C.C., which was enacted to provide a comprehensive framework that defines the rights and

obligations arising from wire transfers. See Exp.-Imp. Bank of the U.S. v. Asia Pulp & Paper

Co., 609 F.3d 111, 118 (2d Cir. 2010). Two sections of that article are at issue: 502,

concerning creditor process, and 503, requiring proper cause before a party to a fund transfer

(but not an intermediary bank) may be enjoined.

10

Section 502(1) defines creditor process as a levy, attachment, garnishment, notice of

11

lien, sequestration, or similar process issued by or on behalf of a creditor or other claimant with

12

respect to an account. Within the context of electronic funds transfers (EFTs), 502 requires

13

that creditor process must be served on the bank of the EFT beneficiary who owes a debt to the

14

creditor. N.Y. U.C.C. 4-A-502(4). The Republic argues that the district court impermissibly

15

skirts 502s bar to creditor process except against a beneficiarys bank because the amended

16

injunctions purport to affect multiple banks and other financial institutions in active concert and

17

participation with Argentina.

18

Section 502 is not controlling because the amended injunctions do not constitute, or give

19

rise to, creditor process, essentially defined in the statute as a levy or attachment. The cases

20

cited by Argentina are inapposite because they deal with attachments, and as we have seen, none

21

has occurred here. See Shipping Corp. of India Ltd. v. Jaldhi Overseas Pte Ltd., 585 F.3d 58, 70

18

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(2d Cir. 2009); Aurelius Capital Partners, LP v. Republic of Argentina, 584 F.3d 120, 124 (2d

Cir. 2009).

Section 503, however, does apply. It provides that only [f]or proper cause may a court

4
5
6
7
8
9
10
11

N.Y. U.C.C. 4-A-503. This section is designed to prevent interruption of a funds transfer

12

after it has been set in motion, and [i]n particular, intermediary banks are protected from

13

injunctions that would disrupt an EFT. Id. 4-A-503 cmt.

14

restrain (i) a person from issuing a payment order to initiate a funds transfer, (ii) an
[EFT] originators bank from executing the payment order of the originator, or (iii)
the [EFT] beneficiarys bank from releasing funds to the beneficiary or the
beneficiary from withdrawing the funds. A court may not otherwise restrain a person
from issuing a payment order, paying or receiving payment of a payment order, or
otherwise acting with respect to a funds transfer.

Argentina argues that plaintiffs purport to have cause for an injunction only with respect

15

to Argentina, and therefore any transfers not involving Argentina cannot be enjoined. But as

16

discussed above, the district court explained why it had good cause to issue injunctions that

17

cover Argentina as well as the Exchange Bond payment system. See NML II at *4-5. Moreover,

18

taking into account 503s ban on injunctions against intermediary banks, the district court

19

expressly excluded intermediary banks from the scope of the amended injunctions. Nonetheless,

20

Fintech argues that BNY, BNYs paying agents, and DTC all act as intermediary banks and are

21

all bound by the amended injunctions. We need not determine now what entities may or may not

22

act as intermediary banks in an EFT that violates the amended injunctions. Whether or not an

23

institution has assisted Argentina in a payment transaction solely in the capacity of an

24

intermediary bank will be a question for future proceedings.

25

We note, however, that the record does not support Fintechs assertions. BNY does not

26

route funds transfers originated by Argentina to Exchange Bondholders. Rather, BNY accepts
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funds as a beneficiary of Argentinas EFT and then initiates new EFTs as directed by its

indenture. See Supp. App. 529, 535, 537, 628-759; see also Appellant Argentina Br. 35

([BNY] initiates its separate funds transfer to distribute payment . . . .) (emphasis in original).

It is noteworthy that neither Argentina nor BNY argue that BNY is an intermediary bank.

Similarly, the clearing systems such as DTC and Euroclear appear from the record and

from their own representations to be other than intermediary banks. DTC does not route wire

transfers but accepts funds that it then allocates only to the [participant banks and brokerage

houses] who have deposited the respective securities with DTC. Supp. App. 1289-90.

Euroclear receives payments from paying agents and then credits such amounts to its account

10

holders. Amicus Euroclear Br. 3. These are not the functions of an intermediary bank under

11

503. See In re Contichem LPG, No. 99 Civ. 10493, 1999 WL 977364, at *2 n.2 (S.D.N.Y. Oct.

12

27, 1999) (McKenna, J.), affd sub nom. ContiChem LPG v. Parsons Shipping Co., Ltd., 229

13

F.3d 426 (2d Cir. 2000) (explaining that a bank was not an intermediary bank for purposes of

14

U.C.C. 4-A-503 because it did not transfer by wire, or attempt to transfer by wire, the funds in

15

question, but simply, as a receiving bank, credited them to [its customer]).

16

IV.

17

Alleged Injuries to the Public Interest

In our October opinion, we considered the dire predictions from Argentina that enforcing

18

the commitments it made in the FAA would have cataclysmic repercussions in the capital

19

markets and the global economy, and we explained why we disagreed. See NML I at 263. On

20

this appeal, Argentina essentially recycles those arguments. We are mindful of the fact that

21

courts of equity should pay particular regard to the public consequences of any injunction. See

22

Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 24 (2008). However, what the

20

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consequences predicted by Argentina have in common is that they are speculative, hyperbolic,

and almost entirely of the Republics own making. None of the arguments demonstrates an

abuse of the district courts discretion.

The district court found that Argentina now has the financial wherewithal to meet its

commitment of providing equal treatment to [plaintiffs] and [Exchange Bondholders]. 2012

WL 5895784, at *1. However, Argentina and the Euro Bondholders warn that Argentina may

not be able to pay or that paying will cause problems in the Argentine economy, which could

affect the global economy. But as we observed in our last opinion, other than this speculation,

Argentina makes no real argument that, to avoid defaulting on its other debt, it cannot afford to

10

service the defaulted debt, and it certainly fails to demonstrate that the district courts finding to

11

the contrary was clearly erroneous. NML I at 263. Moreover, and perhaps more critically,

12

Argentina failed to present the district court with any record evidence to support its assertions.

13

Argentina and amici next assert that, by forcing financial institutions and clearing

14

systems to scour all of their transactions for payments to Exchange Bondholders, the amended

15

injunctions will delay many unrelated payments to third parties. But the financial institutions in

16

question are already called on to navigate U.S. laws forbidding participation in various

17

international transactions. See, e.g., 31 C.F.R. 560.206 (forbidding trade by U.S. persons,

18

including financial institutions, with Iran); 31 C.F.R. 560.208 (forbidding dealings between

19

foreign persons engaged in trade with Iran and U.S. persons); United States v. HSBC Bank USA,

20

N.A., No. 12 Crim. 763, 2013 WL 3306161, at *8 (E.D.N.Y. July 1, 2013) (approving settlement

21

of criminal charges against bank for violations of U.S. law that allowed money laundering by

22

drug traffickers); U.S. Dept of Treasury, Settlement Agreement, MUL-488066, available at

21

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http://www.treasury.gov/resource-center/sanctions/ofac-enforcement/documents/08182010.pdf

(settling allegations that a foreign bank violated U.S. prohibitions on payments to Cuba, Iran,

Burma, and Sudan).12 Indeed, the record in this case appears to belie those concerns and

suggests that payment system participants know when Exchange Bond payments are to arrive,

because each is identified by a unique code assigned to a particular Exchange Bond. See Supp.

App. 1290. In this context, we view Argentinas concerns as speculative. In any event, a district

court always retains the power to adjust the terms of an injunction as unforseen problems or

complexities involving entities such as the clearing systems present themselves. See United

States v. Diapulse Corp. of Am., 514 F.2d 1097, 1098 (2d Cir. 1975).

10

Also unpersuasive is Argentinas warning that we should vacate the injunctions because

11

future plaintiffs may move against multilateral and official sector entities like the IMF.

12

Appellant Argentina Br. 47. As we have observed, this case presents no claim that payments to

13

the IMF would violate the FAA. NML I at 260. A court addressing such a claim in the future

14

will have to decide whether to entertain it or whether to agree with the appellees that

15

subordination of obligations to commercial unsecured creditors beneath obligations to

16

multilateral institutions like the IMF would not violate the Equal Treatment Provision for the

17

simple reason that commercial creditors never were nor could be on equal footing with the

18

multilateral organizations. Id. Speculation that a future plaintiff might attempt recovery

19

affecting the IMF simply provides no reason to withhold relief here.

12

We have never been presented with the question whether U.S. sanctions legally apply
to non-U.S. persons or institutions, and we do not answer that question today. We merely note
that both foreign and domestic financial institutions are already required to police their own
transactions in order to avoid violations of potentially applicable United States laws and
regulations.
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Next, Argentina and various amici assert that the amended injunctions will imperil future

sovereign debt restructurings. They argue essentially that success by holdout creditors in this

case will encourage other bondholders to refuse future exchange offers from other sovereigns.

They warn that rather than submitting to restructuring, bondholders will hold out for the

possibility of full recovery on their bonds at a later time, in turn causing second- and third-order

effects detrimental to the global economy and especially to developing countries. See generally

Amicus Anne Krueger Br. 11-16.

8
9

But this case is an exceptional one with little apparent bearing on transactions that can be
expected in the future. Our decision here does not control the interpretation of all pari passu

10

clauses or the obligations of other sovereign debtors under pari passu clauses in other debt

11

instruments. As we explicitly stated in our last opinion, we have not held that a sovereign debtor

12

breaches its pari passu clause every time it pays one creditor and not another, or even every time

13

it enacts a law disparately affecting a creditors rights. See NML I at 264 n.16. We simply

14

affirm the district courts conclusion that Argentinas extraordinary behavior was a violation of

15

the particular pari passu clause found in the FAA. Id.

16

We further observed that cases like this one are unlikely to occur in the future because

17

Argentina has been a uniquely recalcitrant debtor13 and because newer bonds almost universally

18

include collective action clauses (CACs) which permit a super-majority of bondholders to

13

See also Robin Wigglesworth & Jude Webber, An Unforgiven Debt, Fin. Times, Nov.
28, 2012 (characterizing Argentina as an outlier in the history of sovereign restructurings);
Hung Q. Tran, The Role of Markets in Sovereign Debt Crisis Detection, Prevention and
Resolution, Remarks at Bank of International Settlements Seminar, Sovereign Risk: A World
Without Risk-Free Assets?, Jan. 8, 2013 (Argentina . . . remain[s] a unique example of a
sovereign debtor pursuing a unilateral and coercive approach to debt restructuring . . . .).
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impose a restructuring on potential holdouts. See NML I at 264. Argentina and amici respond

that, even with CACs, enough bondholders may nonetheless be motivated to refuse

restructurings and hold out for full paymentor that holdouts could buy up enough bonds of a

single series to defeat restructuring of that series. But a restructuring failure on one series would

still allow restructuring of the remainder of a sovereigns debt. And, as one amicus notes, if

transaction costs and other procedural inefficiencies are sufficient to block a super-majority of

creditors from voting in favor of a proposed restructuring, the proposed restructuring is likely to

fail under any circumstances. Amicus Kenneth W. Dam Br. 14 n.5.

Ultimately, though, our role is not to craft a resolution that will solve all the problems

10

that might arise in hypothetical future litigation involving other bonds and other nations. The

11

particular language of the FAAs pari passu clause dictated a certain result in this case, but

12

going forward, sovereigns and lenders are free to devise various mechanisms to avoid holdout

13

litigation if that is what they wish to do. They may also draft different pari passu clauses that

14

support the goal of avoiding holdout creditors. If, in the future, parties intend to bar preferential

15

payment, they may adopt language like that included in the FAA. If they mean only that

16

subsequently issued securities may not explicitly declare subordination of the earlier bonds, they

17

are free to say so. But none of this establishes why the plaintiffs should be barred from

18

vindicating their rights under the FAA.

19

For the same reason, we do not believe the outcome of this case threatens to steer bond

20

issuers away from the New York marketplace. On the contrary, our decision affirms a

21

proposition essential to the integrity of the capital markets: borrowers and lenders may, under

22

New York law, negotiate mutually agreeable terms for their transactions, but they will be held to

24

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those terms. We believe that the interestone widely shared in the financial communityin

maintaining New Yorks status as one of the foremost commercial centers is advanced by

requiring debtors, including foreign debtors, to pay their debts. See Weltover, Inc. v. Republic of

Argentina, 941 F.2d 145, 153 (2d Cir. 1991), affd, 504 U.S. 607 (1992).

5
6

CONCLUSION
For the foregoing reasons, we AFFIRM the district courts orders as amended.14 The

appeals from Exchange Bondholder Group, No. 12-4694, and from Fintech Advisory Inc., No.

12-4865, are hereby dismissed. Enforcement of the amended injunctions shall be stayed pending

the resolution by the Supreme Court of a timely petition for a writ of certiorari.

10

14

The orders affirmed here are listed in footnote 2 of this opinion.

25